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32 FEDA News & Views fi rm has increased its sales activity. It has gained some market share, of course, but without reaping additional profi ts. It also has alienated its existing customer base by charging new cus- tomers less. This is a clear example of the race to the bottom. Controlling Incremental Sales Exhibit 1 refl ects the reality that the profi t impact of incre- mental volume depends upon two factors. The fi rst is the extent to which incremental volume necessitates incremental expense. The second is the degree to which incremental vol- ume results in gross margin degradation. To a real extent, these two factors are associated with whether the incremental volume comes from external sources or internal sources. In simpler terms, does the volume depend upon new customers or existing ones? Research going back 75 years consistently indicates that servicing new customers is the lowest-profi t approach to profi tability. Firms must strive to add customers, of course, but it should not drive their profi t model. The most profi table approach to generate truly incremental volume is to engage in the rather unexciting idea of selling more to existing customers. The classic strategy in this regard is to add an additional line to every order. It involves no more delivery stops, no more orders picked (simply more lines) and virtually no increase in payroll expense. The key to success includes monitoring the sales force to ensure they are engaged in add-on selling as well as educating customers as on the breadth of the product line. Finally, in a number of instances, it is a matter of stocking what custom- ers want to buy. All have major profi t implications and can increase sales by 5 to 10 percent. Profi t results can actually be a little better than the best-case scenario. Moving Forward If managed properly, incremental sales volume can be an important profi t driver for FEDA members. The problem is that proper management is extremely diffi cult to maintain in the face of the pressure to add new customers. Long-term profi table change comes from looking internally to the exist- ing customer base. About the Author Dr. Albert D. Bates is Director of Research at the Profi t Planning Group, the fi rm that prepares the PROFIT Report for FEDA. He is also a Principal at the Distribution Performance Project. Visit its website, distperf.com, for free profi t-improve- ment tools. ©2017 Profi t Planning Group and the Distribution Performance Project. FEDA has unlimited duplication rights for this manuscript. Further, members may duplicate this report for their internal use in any way desired. Duplication by any other organization in any manner is strictly prohibited.